States move to curb gas emissions

Australian businesses could be forced to cap their greenhouse gas pollution under a plan hatched by the states and territories.

Frustrated by the Federal Government's refusal to sign the Kyoto Protocol, the states and territories have decided to set up a national market for trading greenhouse gas emissions, similar to the European Union's, which begins next year.

Victoria has joined a formal working group, representing all states and territories.

State Environment Minister John Thwaites said: "The Federal Government is showing no leadership on this issue, which is so important to the future of Victoria and Australia.

"We are working with NSW and other governments on how we can act effectively as a block of committed states, and open up business opportunities to Australian companies."

At this stage, there are no details on timing and whether the market would be voluntary or compulsory.

In emission trading, businesses - such as power stations, smelters and factories - are given a certain limit to their pollution.

Companies can trade units of pollution. If they reduce emissions, they can sell these units, if they increase pollution, they must buy units on the market.

The scheme is designed to cap emissions and put a price on pollution for businesses.

There are similar moves among states in the United States for regional emissions markets in the face of the Bush Administration's refusal to sign the Kyoto Protocol, the international framework for reducing global-warming gases such as carbon dioxide.

A global emissions trading scheme will be part of the Kyoto framework when it comes into effect. This will happen if Russia agrees to ratify the protocol.

Climate-change lawyer Sean Lucy said a national emissions market was possible without Federal Government support, but would be more difficult.

"It is difficult to get seven people to agree on how it should be set up," he said.

Mr Lucy, a senior associate at Phillips Fox, said the major polluters, such as power stations, were under the control of the states, and NSW already had a scheme regulating the emissions of its power stations.

Earlier this year, the Howard Government abandoned the idea of an emissions trading scheme, arguing that it was unlikely to come into effect and created no incentive for industry to reduce emissions.

The states and territories' plan comes as the CSIRO revealed this week near-record growth of carbon dioxide in the atmosphere.

Emissions have peaked dramatically in the past two years, and CSIRO's atmospheric scientists believe that the use of fossil fuels - rather than bushfires - is responsible.

Victoria also announced this week that it had signed up to the Climate Group, a global coalition of governments, corporations and non-government organisations fighting climate change.

It will be launched by British Prime Minister Tony Blair later this month.